Thursday, November 05, 2009

Facebook Privacy Settlement Gets Initial OK; Intervention Denied

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

A proposed settlement between social networking website operator Facebook and a class consisting of Facebook members, resolving privacy claims over Facebook’s “Beacon” advertising program, has been preliminarily approved by the federal district court in San Jose.

The complaining Facebook members had asserted that their privacy rights were violated by the Beacon program, which allegedly caused information about books, movies, and other products purchased by Facebook members on participating sites—such as Blockbuster and eBay—to be posted publicly on Facebook’s “news feed” without permission.

The settlement would resolve all claims against Facebook and several participating retailers. The agreement would also require Facebook to shut down the Beacon program and to contribute $9.5 million to a “settlement fund” devoted to the formation of a non-profit foundation for the purpose of promoting online privacy, safety, and security (CCH Privacy Law in Marketing ¶60,377).

Class Certification, Settlement Terms

The parties were advised that, when seeking final approval, they should be prepared to establish that the requirements for unconditional certification of the class have been met, specifically with regard to the issue of whether there was sufficient “typicality” between class members who may have claims under the Video Privacy Protection Act (VPPA), 18 U.S.C. §2710, and those who did not.

Final approval would also require a sufficient showing that the terms of the settlement were reasonable, specifically in light of the potential VPPA claims and the apparent availability of statutory penalties under the statute.

Notice of the proposed settlement was to be given to the class through (1) an internal Facebook message in the “Updates” portion of the Inbox section of users’ personal accounts, targeting users whose personal information was likely to have been transmitted to Facebook via Beacons and (2) a court-approved summary form of publication notice, to be published in one daily issue of the national edition of USA Today.

Motion to Intervene

A motion by representatives of class action plaintiffs pursuing Video Privacy Protection Act claims against Blockbuster in a federal district court in Texas were not entitled to intervene in the California action for the purpose of opposing the settlement, the court ruled.

The Texas action also arose out of the Beacon program, but the plaintiffs alleged claims only under the VPPA and named Blockbuster as the sole defendant. The Texas action predated the California action by approximately four months.

The motion to intervene was untimely, the court said. The intervenors were aware of the existence of the California action no later than September 2008 and were aware of the pending settlement by early May 2009. The intervenors’ delay in bringing its motion caused prejudice to the parties, including the time and money expended in continuing to negotiate and finalize the settlement agreement.

The intervenors failed to demonstrate a “significantly protectable” interest that would not be adequately protected absent intervention, according to the court.

Moreover, the intervenors were able to make their objections known to the court through the process of moving to intervene. The substance of those objections was taken into account in determining whether conditional approval of the settlement was warranted.